Court ruling puts unpaid internships in jeopardy

1of2Georgetown Law student Eric Glatt was one of two unpaid interns who worked on the 2010 movie "Black Swan." A federal judge ruled last week that Fox Searchlight Pictures violated minimum wage and overtime laws by not paying interns.Photo: Alex Brandon, STF

2of2Eric Glatt, a Georgetown Law student, poses for a photograph on their campus, Wednesday, June 12, 2013 in Washington. Unpaid internships have long been a path of opportunity for students and recent grads looking to get a foot in the door in the entertainment, publishing and other prominent industries, even if it takes a generous subsidy from Mom and Dad. But those days of working for free could be numbered after a federal judge in New York ruled this week that Fox Searchlight Pictures violated minimum wage and overtime laws by not paying interns who worked on production of the 2010 movie "Black Swan." Glatt was one of the interns. (AP Photo/Alex Brandon)Photo: Alex Brandon, STF

WASHINGTON - Unpaid internships have long been a path of opportunity for students and recent grads looking to get a foot in the door in the entertainment, publishing and other prominent industries, even if it takes a generous subsidy from mom and dad.

But those days of working for free could be numbered after a federal judge in New York ruled recently that Fox Searchlight Pictures violated minimum wage and overtime laws by not paying interns who worked on production of the 2010 movie "Black Swan."

The decision by U.S. District Judge William Pauley may lead some companies to rethink whether it's worth the legal risk to hire interns to work without pay. For many young people struggling to find jobs, unpaid internships have become a rite of passage essential for padding résumés and gaining practical experience.

"I'm sure this is causing a lot of discussions to be held in human resource offices and internship programs across the country," said David Yamada, professor of law at Suffolk University in Boston.

Working for free

There are up to 1 million unpaid internships offered in the U.S. every year, said Ross Eisenbrey, vice president of the Economic Policy Institute, a liberal-leaning think tank. He said the number of internships has grown as the economy tumbled, and he blamed them for exploiting young workers and driving down wages.

"The return on a college investment has fallen, students are facing higher and higher debt burdens, and the reaction of employers is to make matters worse for them by hiring more and more people without paying them," Eisenbrey said.

In the ruling, Pauley said Fox should have paid the two interns who filed the lawsuit because they did the same work as regular employees, provided value to the company and performed low-level tasks that didn't require any specialized training.

"Undoubtedly Mr. Glatt and Mr. Footman received some benefits from their internships, such as résumé listings, job references and an understanding of how a production office works," Pauley wrote. "But those benefits were incidental to working in the office like any other employees and were not the result of internships intentionally structured to benefit them."

Chris Petrikin, a spokesman for 20th Century Fox, said the company believes the ruling was erroneous and plans to appeal. Fox had argued that the interns received a greater benefit than the company in the form of job references, resume listings and experience working at a production office.

Juno Turner, an attorney for the plaintiffs, said it was the first time a court had given employee status to young people doing the types of duties commonly associated with interns.

"This is an incredibly important decision as far as establishing that interns have the same wage and hour rights as other employees," Turner said. "You can't just call something an internship and expect not to pay people when the interns are providing a direct benefit to the company."

In ruling for the interns, the judge followed a six-part test outlined by the Labor Department for determining whether an internship can be unpaid. Under the test, the internship must be similar to an educational environment, run primarily for the benefit of the intern as opposed to the employer, and the intern's work should not replace that of regular employees.

'Wage theft'

Glatt, the lead plaintiff, lamented the fact that unpaid internships have become so normal "people do it without blinking an eye."

"It's just become a form of institutionalized wage theft," he said Wednesday. Glatt has an MBA from Case Western Reserve University and said he is studying law at Georgetown University Law Center.

In another lawsuit, two former interns who worked at W Magazine and The New Yorker sued Conde Nast Publications for allegedly failing to pay them the minimum wage. The lawsuit, filed in federal court in New York, seeks class action status on behalf of other interns who worked in the fashion, accessories and fine jewelry departments at Conde Nast magazines. Conde Nast spokesman Joe Libonati said the company's policy was not to comment on pending litigation.

Yet another prominent lawsuit is challenging unpaid internships at Hearst Magazines. Last month, a federal judge in New York declined to let the interns pursue their case against Hearst as a class action.